Little changed in bank landscape, FDIC report shows

Dramatically low interest rates offered on bank deposits, declining loan demand, and lack of economic activity in Northeast Pennsylvania led to little action or movement in area banks' share of deposits.

The Federal Deposit Insurance Corp. released numbers on deposit market share showing PNC Bank continuing its reign in deposit market share with 23.5 percent of all the deposit dollars in the Scranton/Wilkes-Barre metro area, almost 1 in every 4 dollars deposited. Distant second is Wells Fargo, with 9.9 percent of the region's deposits.

But the list, based on data as of June 30, shows few gains and no changes in the rankings of the dominant deposit institutions. That's not unlike the national results, said Arnold Danielson, a banking consultant with Ambassador Financial Group.

"This is the biggest non-event I've seen in a long time," he said. "It's pretty dull."

There are clear reasons for that.

Deposit market share can be an important sign of a bank's health and indicator of a bank's ability to compete for deposits. Also, deposits provide banks their lowest-cost source of funds for lending - the key source of bank profit.

A slowing mortgage market and uncertainty prompted banks to cool their heels and stiffen further the already glacial pace of deposit flow of market share.

Banks aren't chasing deposits. Depositors aren't actively looking to make deposits, Mr. Danielson said. First of all, interest rates paid to depositors on things such as certificates of deposits are low. According to Bankrate.com, a 1-year CD annual yield in the Scranton area is between 0.05 percent and 0.1 percent. Savers have little interest, particularly with renewed faith in the equities market. People with extra money are investing it, rather than parking it at a bank.

"In previous years banks had an inflow of deposits representing money coming out of the stock market - a flight to quality," said Dan Santaniello, chief executive officer at Dunmore-based Fidelity Deposit & Discount Bank. "Now, money is going back into the market and offsetting deposit gains."

The increase in mortgage rates has slowed mortgage and refinancing, meaning that banks are not looking for money to lend.

"There's no loan growth, so for a bank, there is no reason to chase deposits unless you have something to do with them," he said.

A pending change in leadership at the Federal Reserve Bank has created uncertainty about the direction of long-term rates. So banks hesitate to set rates for long-term loans or promote potentially money-losing loan sales.

Business and individuals in the Scranton/Wilkes-Barre metro area did squirrel away $205 million more over that 12-month period, but that translates to an increase of just 1.9 percent. That's considered anemic by banking standards, but growth that Mr. Danielson said may become the new norm. Total deposits in the region were $11.2 billion, divided up among 23 banking institutions.

The number of branches dropped by one to 227. That is likely to change in next year's results. Scranton-based Penseco Financial Services Corp., parent of Penn Security Bank, expects to acquire Peoples Neighborhood Bank, a Hallstead-based bank with four offices in the metro area. The combined bank would become the largest community bank by market share in the region.

Community Bank N.A., the parent company of what is now known as First Liberty Bank & Trust, will purchase eight branches from Bank of America Corp., including five in Luzerne County and one in Lackawanna County. That could propel Community Bank N.A. to the second or third bank by deposits in the area.

Contact the writer: dfalchek@timesshamrock.com

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